EBITDA Calculator

What is EBITDA?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It measures operating performance by removing financing decisions, tax environments, and non-cash accounting charges from earnings.

Net Income Method

$$\text{EBITDA} = \text{Net Income} + \text{Interest} + \text{Taxes} + \text{Depreciation} + \text{Amortization}$$

Start from the bottom line and add back interest, taxes, and non-cash D&A charges to reach EBITDA.

Operating Income Method

$$\text{EBITDA} = \text{EBIT} + \text{Depreciation} + \text{Amortization}$$

When you already have EBIT (operating income), add depreciation and amortization to get EBITDA quickly.

EBITDA Margin

$$\text{EBITDA Margin} = \frac{\text{EBITDA}}{\text{Revenue}} \times 100\%$$

EBITDA margin shows operating cash generation relative to sales. It is widely used in valuation multiples, lender covenant analysis, and cross-company comparisons.

When to Use EBITDA

Business valuation: Investors apply EBITDA multiples to estimate enterprise value.
Debt capacity: Lenders evaluate EBITDA to assess repayment ability.
Cross-company comparison: Removes effects of different depreciation policies and capital structures.
Operational tracking: Shows core business performance independent of accounting choices.

Related tools: use the EBIT Calculator for operating income, the EBITDA Margin Calculator for margin benchmarking, and the Business Valuation Calculator for enterprise value estimates.

Frequently Asked Questions

What is the difference between EBIT and EBITDA?

EBIT excludes interest and taxes only. EBITDA also adds back depreciation and amortization, making it a closer proxy for operating cash flow before capital expenditures.

Is EBITDA the same as cash flow?

No. EBITDA ignores changes in working capital, capital expenditures, and actual cash interest and tax payments. It is a profitability metric, not a cash flow statement figure.

Why add back depreciation and amortization?

Depreciation and amortization are non-cash expenses. Adding them back shows earnings before these accounting allocations, which helps compare companies with different asset bases and depreciation methods.

What is a good EBITDA margin?

Benchmarks vary widely. SaaS companies may exceed 25%, manufacturing often runs 10% to 15%, and retail may be below 10%. Compare against direct industry peers.

Which method should I use to calculate EBITDA?

Both methods produce the same result when inputs are consistent. Use the net income method when you have bottom-line figures. Use the EBIT method when operating income and D&A are readily available.

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